Abstract

This report seeks to establish the effect of private investor in the commercial property auction market. The report finds that the observed influx of private investors over the last decade has resulted in this group making up the majority of bidders in the auction room, outnumbering the once dominant pension funds and investment companies. Primary research conducted in the auction room establishes that the format of auctions play a significant role in attracting private investors. Auction theory combined with the circumstance of this group create a situation where the auction room acts as a gateway into the commercial property market: providing an arena where market prices can be established, large numbers of properties can be accessed, and where sales can be completed quickly. There is also evidence gathered to suggest that a large proportion of the private investors are entering the auction room from the residential buy-to-let market. A slow down in house price inflation, a saturation of the market from new investors and difficulties with tenants are encouraging residential investors now with significant ‘housing boom’ collateral to enter the commercial market, which offers better returns, straightforward management and ‘triple-A’ rated tenants. The report establishes that the weakening performance of alternative investment options, particularly in the residential buy-to-let market, have caused investors to consider commercial property investment. The unique characteristics of auctions have allowed private investors to exploit this market, resulting in their prevalence in the auction room.